New Product Development Strategy: Top 5 Questions

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What will be the main value proposition of your new product? What will make it unique from competitive alternatives?

A two-dimensional positioning map helps you visualize how buyers will perceive your planned product relative to their alternatives.

In doing so, it forces you to identify the most important dimensions of competitive differentiation and to decide how you will compete. The example below shows the 2D position map for wearable fitness devices.

For products that bring brand new value and features to a user group, the chart may have very few reference points.   You can add on an existing product (or a group of products together) that deliver some or all the new features, then map these as alternatives as well.  Wearable fitness was new 10 years ago and had only a few data points, the chart shows just how busy this space is now just for fitness trackers.

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Like Fitbit, if you plan to be first-to-market in a new category, you must consider how long you can sustain that position, and how you want to be positioned relative to competition when it does invariably arrive. There are many competitive factors to consider, and pragmatism is important when considering the trade-offs between them, start by selecting one thing to be great at and do your best on other features:

  • Price: Do you plan to offer a lower price than market alternatives, a higher price to reinforce a premium position, or the best value for money?
  • Performance: Will your product’s performance be faster, stronger, or otherwise superior to that of alternative products?
  • User experience (UX): Compared to alternative products, how will all aspects of user experience (ease-of use, ease-of-purchase, user enjoyment, task efficiency, convenience etc.) be perceived? Achieving the highest positive User Experience rating is often overlooked, but is one of the most important potential competitive differentiators—just consider the success of Apple. There are three guiding rules in a great user interaction model driven by behavioral science. “Don’t make me guess, don’t make me wait and don’t make me feel stupid”.
  • Functionality: Will your feature set be broader or more advanced than that of alternatives?
  • Design appeal: Buyers often make purchase decisions based on first impressions, even if they do not admit it. ‘Rational’ detailed product evaluations are usually biased to justify those initial decisions. Product look, visual personality fit, emotive enjoyment of texture and feel, colour, and other subjective factors have a huge impact on how buyers select everything from consumer appliances to industrial equipment.
  • Quality: How important is it that your product be perceived to have the fewest initial defects, to have the best fit and finish, and to work flawlessly and in all environments and situations you need it to work in including carrying, storing, charging, disposing?
  • Reliability: Is it important that your product is perceived to last a long time and last longer than the competitive alternatives? What about taking away headaches like required maintenance and charging frequency, can they be minimized?
  • Service: After-sales service and support can be a major positive factor for competitive differentiation. How important is this to the success of your new product relative to alternatives? Are there built-in product features that enable simpler maintenance, reminders, after-sales support?

 

You may have all of the in-house expertise and capacity required to lead and execute the development of your next product, but often that’s not the case.

Your in-house team may be consumed with other projects, or you may lack the specialized expertise required to address specific technical challenges. In the case of smart, connected products (i.e.Internet of Things - IoT) , you may need help architecting the overall solution and coordinating the work of multiple suppliers.

This requires a product design team that designs the product to optimize a ‘user experience’, encompassing different locations, situations, interacting devices, network configurations etc to deliver the product value.  You may need help to architect and complete the overall solution as well as to coordinate the work of multiple design specialties and production suppliers to arrive at a successful solution.

There are several common approaches used by companies:

  • In-house: Project management and most of the product development execution is accomplished with your own staff. Common with larger companies.
  • Outsource: An external partner is engaged to design your product, manage riskier parts ofthe process, and source and coordinate the work of additional subcontractors and suppliers. Your people provide business oversight, identify requirements, and contribute feedback to the project.
  • Hybrid: In some cases, it may make sense to manage the project in-house, coordinating the work of a design firm and one or more suppliers. Some products, such as system products that interact with smartphone apps and the cloud (IoT solutions), may require the management and coordination of research, design, engineering and production suppliers by the business team as many choices in product direction have major impacts on the final customer solution.

The largest risk associated with innovative new to market product is commercial failure -the market does not need or want your product.

Cost overruns in the R&D and production preparation stage are inevitable.  Delays are always painful, but they are soon forgotten if product sales take off.  When a product takes off the R&D costs become a fraction typically less than 10% of the sales revenue after 4 years.

Conversely, even if the development project is on-time, on-budget, and on-spec., the effort is wasted if sales fall flat. It is crucial that throughout the product development process you seek validation of market demand, your value proposition, and your product’s feature set and design. Fortunately, you have many quantitative and qualitative assessment tools at your disposal.

The main strategies include:

  • Crowdfunding: Depending on your product category, you may be able to use a popular crowdfunding platform, such as Kickstarter or Indiegogo, to promote your idea early in the development cycle, attract investment, and validate the appeal of your idea. Crowdfunding is often used in the pre-sales stage to quantify size of market as well as user interest in key features.
  • Prototyping: You may be able to use prototypes at several stages of your development project to demonstrate your product idea, gain feedback, and even secure lead customers. In many cases, carefully created prototypes will be perceived as the final product.
  • Low-volume tooling: Production tooling and setup are major investments for hardware products. One option is to build less-expensive, short-life tooling for a low-volume production run of your product to support a market beta trial user test.
  • Full production:Your cost model may suggest that you proceed directly to high-volume tooling and a full-scale production run.  Hopefully you have received strong prior validation using early stage prototypes to confirm your product will hit the mark.  This path is the most common approach to lowest capital costs (avoiding the expensive low volume tooling time lost and tool costs).

 

Your customer acquisition and revenue models may have implications for your product’s design. Smart, connected products (Internet of Things) consist of wireless interconnected hardware, applications, wired connections, data storage, data feeds, database queries, cloud software libraries, licensing and more.

That expands your range of possible business relationships and revenue models (each with specific product feature requirements) and you need to consider your customer-facing services and hardware purchase model:

  • Subscriptions for data feeds, storage, or hosting
  • Purchase, lease, or metered usage ($ per transaction) for hardware or application components
  • ‘Freemium’ models: free basic functionality with paid upgrade opportunities
  • Recurring revenue opportunities through consumables, maintenance, upgrades, and more
  • Opportunities to increase user engagement and the network effect, exposing new users and prospective customers to your product and services

 

If you already have a portfolio of products, you need to understand how your new product will fit into the mix and how it might affect your overall sales.

Even if you are launching a new one-product company, you need to consider your paths for future growth of features, customers and services. Several strategic considerations include:

  • Product portfolio overlap: If your new product provides capabilities that overlap with existing products, it may cannibalize sales rather than grow your overall revenue.
  • Product roadmap: Almost all products evolve over time, with new features and capabilities periodically introduced. A lean strategy starts with a ‘Minimum Viable Product’ (MVP) and a draft roadmap of enhancements that evolves as you gain market feedback and sales validation. Developing a new product with basic functionality, delivered quickly to the market is a good way to test customer base, determine highest value features and create a cascade of tiered function products to build a product portfolio over a period of years.
  • Product line refresh: You may have opportunities to reinvigorate sales of an existing product by improving its design appeal, boosting usability, connecting to the internet and adding new features that drive data collection for real time insight on customer use and preferences.
  • Product portfolio expansion: As illustrated by Geoffrey Moore’s famous bowling alley analogy, there are two main directions for business expansion: develop new products for your existing customer segments, or adapt an existing product to new customer segments.

 

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Geoffrey Moore's Famous Bowling Alley Marketing Development Analogy

Successful product development follows a solid product development strategy.

Solid, consistent answers to the above five questions are the basis for a winning product development strategy—one that will guide you through the tactical work of defining feature sets, cost and performance targets, realistic project timelines, and more.
Everything flows more smoothly—and with minimal risk—when you have a strategic development framework in place.

The Five Key Elements of a Winning Strategy for Product Development:

  1. Differentiate with New User and Sales Market Value
  2. Select the appropriate Team
  3. Design and Test and Refine to the Customer highest value items
  4. Know exactly what your Customer wants ‘fantastic use experience’ and reasonable price
  5. Plan a forward Portfolio, then enter market quickly with simple high value product 1

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  • Is product partially designed already?
  • Is there a prototype model available?
  • Is this an existing product re-design or cost reduction?
  • Does the new product have wireless radio, connect to the internet? to smartphone? other?
  • Does product require more documentation for regulatory certifications, medical certifications?
  • Is your company new to hardgoods development?
  • Product challenges, risks, need for early research on difficult to figure out features?
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